United States Institute of Peace

The Iran Primer

Economic Trends: June and July

Cameron Glenn

Economic trends in June and July were heavily shaped by the nuclear deal between Iran and the world’s six major powers, which was announced on July 14. Iran is poised to benefit economically from the deal, once a number of U.N., U.S., and E.U. sanctions are lifted. European and Asian investors, businessmen, and officials flooded Iran in the weeks following the announcement, seeking to explore new economic opportunities. Iranian officials have been soliciting foreign investment, particularly in the oil and gas and automotive industries.

Domestically, Iran experienced a boost on the Tehran Stock Exchange following the deal’s announcement, and tourism income is expected to increase by 4.4 percent in 2015. Rouhani’s administration also continues to cut back on the cash handouts established under former president Mahmoud Ahmadinejad. In July, officials announced plans to suspend handouts to one million wealthy Iranians.
The following is a rundown of the top economic stories with links.
U.N. sanctions and nuclear-related E.U. and U.S. sanctions on Iran will be removed on the nuclear deal’s implementation day, expected to occur in early 2016. As sanctions are lifted, Iran will also recover around $100 billion in foreign exchange assets, though U.S. Treasury officials estimate that only around $50 billion of that amount will be in usable liquid assets.
Businessmen from Europe and Asia have been flocking to Iran in anticipation of sanctions relief. Iran is “looking for investments and new technologies, and finally an increase in our exports,” President Hassan Rouhani said on July 27. Foreign companies “are seeking a strong presence in Iran, and if we have a win-win policy in our economic planning, both sides would benefit,” according to Rouhani. Head of Iran’s Trade Development Organization Valiollah Afkhami-Rad said on July 27 that he expects Iran’s exports and domestic production to rise at least 20 percent after sanctions are lifted.
But officials indicated Iran will be selective in its trade partners. “We never get overexcited about the arrival of any trade delegation…we have the power to choose the best,” Government Spokesman Mohammad Baqer Nobakht said on July 28.
Deputy Foreign Minister Abbas Araghchi made similar remarks on July 30, stating that “European foreign ministers are queuing up to travel to Iran, but it does not mean we’ll offer them whatever they would want. Rather, it is us who have the choice.”
United States
U.S. sanctions relief will generally be restricted to nuclear-related restrictions on non-U.S. individuals and companies. A senior U.S. administration official said American companies “will still be generally prohibited from all dealing with Iranian companies, including investing in Iran or facilitating third-country trade with Iran.” Limited exceptions include civil aviation and goods like carpets, pistachios, and caviar.
But head of Iran’s National Carpet Center Hamid Kargar still expects an increase in carpet exports to the United States after sanctions are lifted. “Hand-woven carpet manufacturers must observe the American market and monitor the performance of rival countries so that we can boost our exports in 2016,” he said. Before the latest round of sanctions in 2010, the United States accounted for 16.5 percent of Iran’s carpet exports.
Additionally, on July 14, Head of Iran World Trade Center Mohammad Reza Sabzalipour announced that Iran plans to send a delegation of economic activists to the United States later this year.
E.U. sanctions relief will be more extensive, lifting restrictions on financial transactions, energy, investment, and other areas. European companies have been quick to explore new opportunities in the Iranian market.
On July 23 and 24, a conference was hosted in Vienna by the Austrian Federal Economic Chamber, Iran’s Trade Promotion Organization, and the joint chambers of commerce of Iran, France, Germany and the United Kingdom. Minister of Industry, Trade and Mine Mohammad Reza Nematzadeh led the Iranian delegation. Iran has already approved more than $2 billion in investment projects by European countries, according to Deputy Economy Minister Mohammad Khazaei.
Additionally, Serbian Foreign Minister Ivica Dacic visited Iran on August 3 to discuss strengthening economic ties, and Spanish Foreign Minister Jose Manuel Garcia Margallo announced that he will visit Iran in September. Food companies in Denmark, Finland, and the Netherlands are also eyeing Iran as a potential market for dairy products.

Italian Economic Development Minister Federica Guidi visited Iran with a team of 300 businessmen in early August. Italy, which used to be one of Iran’s major trade partners, has been trying to revive economic ties. During the visit, investment bank Mediobanca, Italy’s development ministry, and export credit agency SACE signed a memorandum of understanding “to facilitate future economic and commercial relations between the two countries.”


Minister Laurent Fabius visited Iran on July 29, meeting with Iranian Oil Minister Bijan Zanganeh and other senior officials. It was the first visit to Iran by a French foreign minister in 12 years. Fabius said France was “very firm” during the negotiations, but that it would not impact the ability of French firms to reenter Iran. French firms – particularly oil company Total and automaker Peugeot – had been active in Iran before sanctions were tightened.
During Fabius’ visit, Zanganeh said a “new chapter will open in cooperation with France’s Total for development of Iran’s oilfields.” Additionally, deputy head of Iran’s Civil Aviation Organization Mohammad Khodakarami said that France will explore increasing flights between Paris and Tehran. France also plans to send a delegation of businessmen to Iran in September.
In early July, before the deal was announced, French companies had already struck deals to renovate Iran’s cargo and passenger planes and develop railway stations.
Economy Minister Sigmar Gabriel became the first high-level European official to visit Iran after the deal was announced. “German companies are not only prepared to sell products to Iran, but also seek to expand lasting and stable economic cooperation [with Iran],” Gabriel said. But he also indicated that closer economic ties would depend on Iran improving its stance towards Israel. Gabriel was accompanied by a delegation of businessmen, and met with several Iranian officials including Oil Minister Bijan Zanganeh.
German and Iranian officials hope to increase bilateral trade from 2.7 billion euros in 2014 to 6 or 7 billion euros in 2016.
Iran plans to increase its trade with Greece to three billion euros in the next three years, according to Secretary General of the Iran-Greece Joint Council Majid Moafeq Qadiri. Iran hopes to boost exports of petrochemicals, dried fruits, carpets, minerals, and building materials. An Iranian trade delegation will visit Greece in August.
China – Iran’s largest trade partner – plans to ramp up its activities in Iran’s oil and gas sector. Chinese energy firms plan to pump an additional 160,000 barrels of Iranian oil per day starting in October, as part of two energy projects that had previously stalled under sanctions. China imported 671,800 barrels of Iranian crude oil per day in June 2015, up from 531,200 barrels per day in June 2014, according to Reuters.
Iranian Deputy Foreign Minister for Asia and Pacific Affairs Ebrahim Rahimpour met with Chinese foreign minister Wang Yi on July 28, reinforcing China’s role as a strategic partner for Iran.

Russian Energy Minister Aleksandr Novak said that Russia plans to explore the possibility of resuming oil and gas projects in Iran. Russian oil firm Lukoil had reopened its Iran office in April, with plans to resume operations once sanctions are lifted. Additionally, a meeting of the Russian-Iranian commission on trade and economic cooperation will be held in the fall.
Analysts expect that Iran’s return to the oil and gas market could have a negative impact on Russia, driving down oil prices and creating new competition. But Novak downplayed those fears, claiming that Iran’s return to the oil market will not have a significant impact on prices. “The market has assessed and absorbed all of [Iran’s comeback to the oil market] long ago," he said on July 17.

Cash handouts

In August, Iran will suspend its monthly cash handouts to one million wealthy citizens, according to Labor and Social Welfare Minister Ali Rabiei. The monthly handouts, established by former president Mahmoud Ahmadinejad, are 455,000 rials (around $15). All Iranians had been eligible to receive them, regardless of income, but they have increasingly strained Iran’s state budget in a climate of sanctions and low oil prices.
On July 13, Vice Governor for Economic Affairs at the Central Bank of Iran Peyman Ghorbani said Iran hopes to lower inflation to single digits by 2017. As of June, inflation stood around 15.6 percent.
Oil and Gas
On June 15, President Hassan Rouhani announced that Iran’s current budget is “the least oil-dependent ever.” But oil ministry officials announced plans to increase oil exports as Iran and the world’s six major powers concluded a nuclear deal. On July 6, deputy oil minister Mansour Moazzami said Iran planned to double its oil exports from 1.2 million barrels per day to 2.3 million barrels per day after sanctions are removed. On July 20, Oil Minister Bijan Zanganeh said “Gas production in Iran will surpass 1,000 million cubic meters per day in the next three days. Moreover, oil production is expected to reach 4.7 million bpd in the near future.”
Iran’s oil sector needs $50 billion in annual investment, according to Amir-Abbas Soltani, secretary of parliament’s energy commission. Most of these funds, Soltani said, are needed to develop Iran’s South Pars field, the world’s largest natural gas field. Deputy Oil Minister for Commerce and International Affairs Amir-Hossein Zamaninia said on July 23 that Iran could feasibly deliver liquefied natural gas to Europe within five to 10 years. Officials are aiming to implement oil and gas investment projects worth $185 billion by 2020.
Iran also plans to introduce new contract models, addressing some of the issues with “buy-back” contracts unpopular with foreign firms, according to Deputy Oil Minister Hossein Zamaninia. The new deals will last 20-25 years, much longer than the old contracts.
Auto Industry
Minister of Industry, Trade and Mine Mohammad Reza Nematzadeh said on July 24 that Iran hopes to produce three million vehicles by 2025, with one million units exported abroad.
On July 29, Iranian automaker Iran Khodro and German automaker Mercedes-Benz announced they plan to sign a five-year deal to distribute Benz cars in Iran and a 10-year deal for production of commercial vehicles.
Iran Khodro has also held discussions with Volkswagen and French automaker Peugeot. It hopes to expand ties with Renault and Suzuki as well, according to CEO of Iran Khodro Industrial Group Hashem Yekeh Zareh. Meanwhile, Chinese automaker Chery announced in July that its share of the Iranian market had decreased in the past year.
Iran’s auto industry is its second largest sector, after the oil industry, and accounts for 10 percent of Gross Domestic Product (GDP).
Tehran Stock Exchange
On July 14, stocks on the Tehran Stock Exchange rose to their highest levels since April after the nuclear deal was announced, led by oil and gas companies. The Tamim Petroleum & Petrochemical Investment Company saw the largest gains, with a 3.2 percent increase.


On July 1, Supreme Leader Ayatollah Ali Khamenei signed off on Iran’s economic development plan for 2015 to 2020, envisioning an average of 8 percent economic growth annually. He called for increasing foreign investment by “creating the necessary motivation and incentives,” particularly from Southeast Asia.
The value of Iran’s tourism industry is expected to increase by 4.4 percent in 2015, according to the World Travel and Tourism Council. Iran’s investments in tourism are also expected to increase from $2.8 billion in 2014 to $2.9 billion in 2015.


Tags: Economy

International Groups Back Nuclear Deal

Several international organizations have expressed support for the final nuclear deal between Iran and the world’s six major powers. The United Nations Security Council endorsed the deal on July 20, and the Association of South East Asian Nations announced their approval on August 6. The Gulf Cooperation Council, while expressing concerns about Iran, indicated that the deal “contributes to the region’s long-term security.” The following are excerpted press releases from international and regional organizations on the nuclear deal.

United Nations Security Council
“The Security Council today coalesced around a sweeping resolution that endorsed the 14 July agreement on Iran’s nuclear programme, setting out a rigorous monitoring mechanism and timetable for implementation, while paving the way for the lifting of United Nations sanctions against that country.
“Unanimously adopting resolution 2231 (2015), the 15-nation body endorsed the Joint Comprehensive Plan of Action signed in Vienna by the five permanent members of the Council, plus Germany, the European Union and Iran.
“The Council, through the 104-page text, including annexes that detailed the sanctions-related provisions and listings, requested the International Atomic Energy Agency to undertake verification and monitoring of Iran’s compliance. It reaffirmed that Iran should cooperate fully with the Agency to resolve all outstanding issues. Upon receipt of a positive report from the Agency, the Council would terminate sanctions set out in resolutions adopted between 2006 and 2015.
“Furthermore, the Council decided that the resolution’s provisions should, pending confirmation of implementation, expire 10 years after its adoption, and with that, it would remove the Iranian nuclear issue from its agenda. At the same time, the text outlined the process for automatically reinstating the sanctions in the event of non-compliance.”
—July 20, 2015, in a U.N. Security Council press release
Click here for the full text of Resolution 2231
Association of South East Asian Nations (ASEAN)
“The Foreign Ministers of the Member States of the Association of South East Asian Nations (ASEAN), Australia, the People's Republic of China, Republic of India, Japan, the Republic of Korea, New Zealand, the Russian Federation and the United States of America, on the occasion of the 5th East Asia Summit Foreign Ministers’ Meeting, held in Kuala Lumpur, Malaysia on 6 July 2015, welcomed the Joint Comprehensive Plan of Action (JCPOA) reached on 14 July 2015 between the E3/EU+3 (China, France, Germany, the Russian Federation, the United Kingdom and the United States, with the High Representative of the European Union for Foreign Affairs and Security Policy) and the Islamic Republic of Iran, to ensure the exclusively peaceful nature of Iran’s nuclear programme.
“The Ministers further welcomed the adoption of Resolution 2231 by the United Nations Security Council on 20 July 2015, which endorsed the JCPOA; supported the commitment of states party to the Nuclear Non-Proliferation Treaty to comply fully with their obligations; and recalled the right of states party to the Treaty, in conformity with Articles I and II of the Treaty, to develop research, production and use of nuclear energy for peaceful purposes without discrimination.
“The Ministers recognised that the E3/EU+3 and Iran have reached an important resolution, which, if fully implemented, would contribute to building confidence in the exclusively peaceful nature of Iran’s nuclear programme and affirmed that the JCPOA reflects a step-by-step approach and includes reciprocal commitments on the part of Iran and the E3/EU+3. Implementation of the JCPOA will begin when the IAEA verifies that Iran has taken all of its “key nuclear-related steps, and the E3/EU+3 takes reciprocal lifting of sanctions. Full implementation of the JCPOA will enable the comprehensive lifting of all UN Security Council nuclear-related sanctions as well as U.S. and E.U national sanctions related to Iran’s nuclear programme.
“The Ministers further recognised that if the E3/EU+3 and Iran follow through on the JCPOA, the international community will be able to resolve this significant international security challenge, and to do so peacefully.”
—August 6, 2015, in a State Department statement
Gulf Cooperation Council
“U.S. Secretary of State John Kerry joined Foreign Ministers of the Gulf Cooperation Council (GCC) states and the Secretary General of the GCC in Doha today, August 3, 2015, to discuss progress and chart out next steps on GCC-U.S. strategic partnership and areas of cooperation announced at Camp David on May 14, 2015. The delegations reviewed the Joint Comprehensive Plan of Action (JCPOA) between the P5+1 and Iran, the conflict in Yemen and the necessity of a political solution there based on the GCC Initiative and National Dialogue Outcomes, and discussed regional challenges as outlined below. The Ministers also previewed the agenda for the fifth session of the GCC-U.S. Strategic Cooperation Forum (SCF), to be held in New York in late September.
“The Ministers discussed the JCPOA in considerable detail, including its restrictions, transparency, safeguards, access to any declared or undeclared nuclear facility, enforcement mechanisms, and its regional implications. Reiterating the position expressed at Camp David that “a comprehensive, verifiable deal that fully addresses the regional and international concerns about Iran’s nuclear program is in the security interests of GCC member states as well as the United States and the international community,” the Ministers agreed that, once fully implemented, the JCPOA contributes to the region’s long-term security, including by preventing Iran from developing or acquiring a military nuclear capability. The Ministers called for Iran to strictly honor its obligations under the JCPOA and its responsibilities under the Nuclear Non-Proliferation Treaty and relevant United Nations Security Council resolutions.
“The Ministers reaffirmed the commitments made at Camp David that the United States and the GCC states share a deep and historic interest in the security of the region, including the political independence and territorial integrity, safe from external aggression, of GCC member states. The United States reiterated its commitment to working with the GCC to prevent and deter external threats and aggression. In the event of such aggression or the threat of such aggression, the United States stands ready to work with our GCC partners to determine urgently what action may be appropriate, using the means at our collective disposal, including the potential use of military force, for the defense of our GCC partners.
“Expressing concern about recent statements by some Iranian officials, GCC member states and the United States reiterated their opposition to Iran’s support for terrorism and its destabilizing activities in the region and pledged to work together to counter its interference, particularly attempts to undermine the security of and interfere in the domestic affairs of GCC member states, most recently in Bahrain. The Ministers stressed the need for all countries in the region to engage according to the principles of good neighborliness, non-interference, and respect for territorial integrity.”
—August 3, 2015, in a State Department statement
Photo credit: UN logo via Wikimedia Commons

US Treasury Official on Nuclear Deal

Sanctions relief was a “necessary part of any deal,” according to Adam Szubin, acting Under Secretary of Treasury for Terrorism and Financial Intelligence, in his testimony to the Senate Banking Committee on August 5.  Szubin defended the deal, emphasizing that it would not have been “feasible to escalate the economic pressure in order to obtain a broader Iranian capitulation.” The following is Szubin’s written testimony for the hearing.

Chairman Shelby, Ranking Member Brown, and Members of the Committee:  Thank you for inviting me to appear before you today to discuss the Joint Comprehensive Plan of Action (JCPOA) that the United States and our negotiating partners concluded with Iran on July 14.  It is an honor to appear alongside Ambassador Sherman.  A foreign policy matter of such importance deserves a careful analysis.  I am confident that an open and honest debate based on the facts will make evident that this deal will strengthen America’s security and that of our allies.
Having spent more than a decade at the Treasury Department working to strengthen our diplomatic efforts by imposing sanctions pressure on Iran, I will focus on the global sanctions coalition built and led by the United States that gave us the leverage necessary to secure unprecedented nuclear concessions from Iran.  I will then discuss the nature of the sanctions relief in this deal, and how the JCPOA is designed to keep pressure on Iran to fulfill its nuclear commitments.  Lastly, I will explain the tough sanctions that will remain in place to combat a range of malign Iranian activity outside the nuclear sphere—including its support for terrorism and militant proxies in the Middle East, its missile program, and its human rights abuses.
The Impact of Our Sanctions: Bringing Iran to the Table
The powerful set of U.S. and international sanctions on Iran, and especially those imposed over the last five years, effectively isolated Iran from the world economy.  The U.S. government led this effort across two administrations and with bipartisan backing in Congress.  Together we obtained four tough UN Security Council resolutions, and built upon our longstanding primary embargo by enlisting the support of foreign partners from Europe to Asia to impose further pressure on Iran.  This campaign yielded results.  After years of intransigence, Iran came to the table prepared to negotiate seriously over its nuclear program.
To see the impact of the sanctions campaign, consider the following metrics.  Today, the Iranian economy is estimated to be only 80 percent the size that it would have been, had it continued on its pre-2012 growth path.  Consequently, it will take until at least 2022—even with sanctions relief—for Iran to get back to where it would have been absent our sanctions.  Iran has foregone approximately $160 billion in oil revenue alone since 2012, after our sanctions reduced Iran’s oil exports by 60 percent.  This money is lost and cannot be recovered.
Iran’s designated banks, as well as its Central Bank, have been cut off from the world.  The Iranian currency has declined by more than 50 percent.  We maintained strong economic pressure throughout the two-year negotiating period.  Indeed, during that time, our sanctions deprived Iran of an additional $70 billion in oil revenue, and Iran’s total trade with the rest of the world remained virtually flat.
To achieve this pressure, international consensus and cooperation were vital.  Around the world, views on Iran’s sponsorship of groups like Hizballah and its regional interventions differ.   But the world’s major powers have been united in preventing a nuclear-armed Iran.  Iran’s major trading partners and oil customers joined us in imposing pressure on Iran, and paid a significant economic price to do so, based on U.S. sanctions and a clear path forward.  The point of these efforts was clear:  to change Iran’s nuclear behavior, while holding out the prospect of relief if Iran addressed the world’s concerns about its nuclear program.
The Nature and Scope of JCPOA Relief
As Ambassador Sherman has described, the JCPOA addresses these nuclear concerns by closing off Iran’s pathways to a nuclear weapon and providing access to ensure compliance, while preserving leverage if Iran breaches the deal.  If Iran fully complies with the terms of the JCPOA, and if the IAEA verifies their compliance, phased sanctions relief will come into effect.
To be clear: when the JCPOA goes into effect, there will be no immediate relief from UN, EU, or U.S. sanctions.  There is no “signing bonus.” Only if Iran fulfills the necessary nuclear conditions—which will roll back its nuclear program and extend its breakout time five-fold to at least one year—will the United States lift sanctions.  We expect that to take at least six to nine months.  Until Iran completes those steps, we are simply extending the limited relief that has been in place for the last year and a half under the Joint Plan of Action.  There will not be a cent of new sanctions relief.
Upon “Implementation Day,” when phased relief would begin, the United States will lift nuclear- related secondary sanctions targeting third-country parties conducting business with Iran, including in the oil, banking, and shipping sectors.  These measures were imposed in response to the security threat from Iran’s nuclear program; accordingly, they will be suspended in exchange for verifiable actions to alleviate that threat.
As we phase in nuclear-related sanctions relief, we will maintain and enforce significant sanctions that fall outside the scope of this deal, including our primary U.S. trade embargo.  Our embargo will continue to prohibit U.S. persons from investing in Iran, importing or exporting to Iran most goods and services, or otherwise dealing with most Iranian persons and companies. Iranian banks will not be able to clear U.S. dollars through New York, hold correspondent account relationships with U.S. financial institutions, or enter into financing arrangements with U.S. banks.  Nor will Iran be able to import controlled U.S.-origin technology or goods, from anywhere in the world.  In short, Iran will continue to be denied access to the world’s principal financial and commercial market. The JCPOA provides for only minor exceptions to this broad prohibition.
Countering Malign Iranian Conduct
As we address the most acute threat posed by Iran, its nuclear program, we will be aggressively countering the array of Iran’s other malign activities.  The JCPOA in no way limits our ability to do so, and we have made our posture clear to both Iran and to our partners.  This means that the United States will maintain and continue to vigorously enforce our powerful sanctions targeting
Iran’s backing for terrorist groups such as Hizballah.  In the last two months alone, for example, we designated eleven Hizballah military officials and affiliated companies and businessmen.  We will also continue our campaign against Hizballah’s sponsors in Iran’s Islamic Revolutionary Guard Corps-Quds Force; Iran’s support to the Houthis in Yemen; its backing of Assad’s regime in Syria; and its domestic human rights abuses.  We will also maintain the U.S. sanctions against Iran’s missile program and the IRGC writ large.
Let there be no doubt about our willingness to continue enforcing these sanctions.  During the JPOA period, when we were intensely negotiating with Iran, we took action against more than 100 Iranian-linked targets for their WMD, terrorism, human rights abuses, evasion and other illicit activities.
Nor are we relieving sanctions on Iran’s Revolutionary Guard Corps, its Quds Force, any of their subsidiaries or senior officials.  The U.S. designation of Quds Force commander Qassem Suleimani will not be removed, nor will he be removed from EU lists related to terrorism and Syria sanctions.
Sanctions will also remain in place on key Iranian defense entities, including Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL), Defense Industries Organization, Aerospace Industries Organization and other key missile entities, including Shahid Hemat Industrial Group (SHIG) and Shahid Bagheri Industrial Group (SBIG).  We will also retain sanctions on Iranian firms such as the Tiva Sanat Group, which has worked to develop a weapons-capable fast boat to be used by the IRGC-Navy, and Iran Aircraft Manufacturing Industrial Company (HESA), which manufactures unmanned aerial vehicles used by the IRGC, as well as third country firms that have assisted Iran’s missile and defense programs.  Under the JCPOA, more than 225 Iran-linked persons will remain designated and subject to our sanctions, including major Iranian companies and military and defense entities and firms.
It is worth emphasizing that our sanctions authorities will continue to affect foreign financial institutions that transact with these more than 200 Iranian persons on our Specially Designated Nationals List, as well as persons who provide material or other types of support to Iranian SDNs.  These measures provide additional deterrence internationally.  For example, a foreign bank that conducts or facilitates a significant financial transaction with Iran’s Mahan Air, the IRGC-controlled construction firm Khatam al Anbiya, or Bank Saderat will risk losing its access to the U.S. financial system, and this is not affected by the nuclear deal.
Sanctions Snap Back
Of course, we must guard against the possibility that Iran does not uphold its side of the bargain. That is why, should Iran violate its commitments once we have suspended sanctions, we will be able to promptly snap back both U.S. and UN sanctions, and our EU colleagues have reserved the ability to do so with respect to their sanctions as well.
For U.S. sanctions, this can be achieved rapidly—in a matter of days—from smaller penalties up to and including the powerful oil and financial measures that were so effective against Iran’s economy.  New measures could also be imposed if Iran were to violate its commitments and renege on the deal.
Multilateral sanctions at the UN also can be reimposed quickly, and the United States has the ability to reimpose those sanctions unilaterally, even over the objections of other P5 members.
To those with concerns that Iran can accumulate minor violations over time, it is important to clarify that if there are small violations, we can address them through a variety of measures – snap back does not have to be all or nothing.  This approach gives us maximum flexibility and maximum leverage.
If sanctions snap back, there is no “grandfather clause.” While we have committed not to retroactively impose sanctions for legitimate activity undertaken during the period of relief, any transactions conducted after the snap-back occurs are sanctionable.  To be clear, there is no provision in the deal that protects contracts signed prior to snap back—once snap back occurs, any prospective transaction is sanctionable.
JCPOA Relief in Perspective
Some have argued that sanctions relief is premature until Iran pursues less destructive policies at home and abroad, and that funds Iran recovers could be diverted for destructive purposes.  But Iran’s ties to terrorist groups are exactly why we must keep it from ever obtaining a nuclear weapon.  The JCPOA will address this nuclear danger, freeing us and our allies to check Iran’s regional activities more aggressively.  By contrast, walking away from this deal would leave the world’s leading state sponsor of terrorism with a short and decreasing nuclear breakout time.  We are far better positioned to combat Iran’s proxies with the nuclear threat off the table.
We must also be measured and realistic in understanding what sanctions relief will really mean to Iran.  Estimates of total Central Bank of Iran (CBI) foreign exchange assets worldwide are in the range of $100 to $125 billion. Our assessment is that Iran’s usable liquid assets after sanctions relief will be much lower, at a little more than $50 billion.  The other $50-70 billion of total CBI foreign exchange assets are either obligated in illiquid projects (such as over 50 projects with China) that cannot be monetized quickly, if at all, or are composed of outstanding loans to Iranian entities that cannot repay them.  These assets would not become accessible following sanctions relief.
Because Iran’s freely accessible assets constitute the country’s reserves, not its annual budgetary allowance, Iran will need to retain a portion of these assets to defend its currency and stability.
Of the portion that Iran spends, we assess that the vast majority will be used to tackle a mountain of debts and domestic needs that at over a half trillion dollars are more than ten times as large as the funds it can freely use.  Iran will also likely need a meaningful portion of its liquid foreign exchange reserve assets to finance pent-up import demand, unify official and unofficial exchange rates, and maintain an adequate foreign exchange buffer against future external shocks.  For reference, $50 billion is roughly in line with the 5-10 months of imports foreign exchange buffer that comparable emerging markets countries and the IMF consider prudent.  All the while, Iran’s economy continues to suffer from immense challenges—due to factors including budget deficits,
endemic corruption, dilapidated energy infrastructure, a poor business environment, and the reputational concerns of foreign companies.  Let us also recall that President Rouhani, who rose to the presidency on a platform of economic revival, faces a political imperative to show meaningful economic gains to the Iranian population.  The Supreme Leader’s approval of the negotiations suggests his understanding of this need as well.
We are mindful that at least some of the funds Iran receives from relief could find their way to malign purposes.  This prospect is inherent in any realistic nuclear deal, no matter its duration or terms.  But therefore it is incumbent on us to intensify our work, alongside Israel and our regional allies, to combat these malicious proxies.
Alternative Approaches
Sanctions were a means to an end, and relief was a necessary part of any deal.  The deal we have achieved in the JCPOA is a strong one.  It phases in relief in exchange for verified Iranian compliance with nuclear-related steps, and has a strong snap-back built in.  It would be a mistake for the United States to back away based on the misconception that it would be feasible to escalate the economic pressure in order to obtain a broader Iranian capitulation.
It is unrealistic to think that, with a broken international consensus and less leverage, we could somehow secure a “much better” deal involving Iran’s capitulation and the eradication of its peaceful nuclear infrastructure or the cessation of its support for longtime proxies such as Hizballah.
Our partners agreed to impose costly sanctions on Iran for one reason—to negotiate an end to the threat of a nuclear weapon-capable Iran.  If we change our terms now, and insist that these countries now escalate sanctions when we have jointly addressed this threat through the JCPOA, then our ability to impose additional pressure will be severely diminished.
Iran’s escrowed reserves are not in our hands, and much of the world is prepared to do business in Iran.  If the United States were to walk away from this deal, and ask our partners to continue locking up Iran’s reserves and maintaining sanctions, the consensus likely would fray, with unpredictable results.  Rejecting the deal in pursuit of objectives over which there is far less international consensus and unity would allow the sanctions regime to unravel and our leverage to dissipate.  And we would risk losing both a nuclear deal and the sanctions leverage.
Enforcing this deal, and securing the nuclear concessions Iran has made, will capitalize on our carefully built economic pressure strategy.  The deal’s terms accomplish our overarching goal. Blocking all of Iran’s paths to a nuclear bomb makes us and our allies safer.
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Obama Defends Nuclear Deal

On August 5, President Barack Obama gave a speech at American University defending the nuclear deal. The following is a transcript of his remarks.

It is a great honor to be back at American University, which has prepared generations of young people for service and public life.
I want to thank President Kerwin and the American University family for hosting us here today.
Fifty-two years ago, President Kennedy, at the height of the Cold War, addressed this same university on the subject of peace. The Berlin Wall had just been built. The Soviet Union had tested the most powerful weapons ever developed. China was on the verge of acquiring the nuclear bomb. Less than 20 years after the end of World War II, the prospect of nuclear war was all too real.
With all of the threats that we face today, it is hard to appreciate how much more dangerous the world was at that time. In light of these mounting threats, a number of strategists here in the United States argued we had to take military action against the Soviets, to hasten what they saw as inevitable confrontation. But the young president offered a different vision.
Strength, in his view, included powerful armed forces and a willingness to stand up for our values around the world. But he rejected the prevailing attitude among some foreign-policy circles that equated security with a perpetual war footing.

Instead, he promised strong, principled American leadership on behalf of what he called a practical and attainable peace, a peace based not on a sudden revolution in human nature, but on a gradual evolution in human institutions, on a series of concrete actions and effective agreements.
Such wisdom would help guide our ship of state through some of the most perilous moments in human history. With Kennedy at the helm, the Cuban Missile Crisis was resolved peacefully.
Under Democratic and Republican presidents, new agreements were forged: A nonproliferation treaty that prohibited nations from acquiring nuclear weapons, while allowing them to access peaceful nuclear energy, the SALT and START treaties, which bound the United States and the Soviet Union to cooperation on arms control.
Not every conflict was averted, but the world avoided nuclear catastrophe, and we created the time and the space to win the Cold War without firing a shot at the Soviets.
The agreement now reached between the international community and the Islamic Republic of Iran builds on this tradition of strong, principled policy diplomacy.
After two years of negotiations, we have achieved a detailed arrangement that permanently prohibits Iran from obtaining a nuclear weapon. It cuts off all of Iran's pathways to a bomb. It contains the most comprehensive inspection and verification regime ever negotiated to monitor a nuclear program.
As was true in previous treaties, it does not resolve all problems. It certainly doesn't resolve all our problems with Iran. It does not ensure a warming between our two countries. But it achieves one of our most critical security objectives. As such, it is a very good deal.
Today, I want to speak to you about this deal and the most consequential foreign-policy debate that our country has had since the invasion of Iraq, as Congress decides whether to support this historic diplomatic breakthrough or instead blocks it over the objection of the vast majority of the world. Between now and the congressional vote in September, you are going to hear a lot of arguments against this deal, backed by tens of millions of dollars in advertising. And if the rhetoric in these ads and the accompanying commentary sounds familiar, it should, for many of the same people who argued for the war in Iraq are now making the case against the Iran nuclear deal.
Now, when I ran for president eight years ago as a candidate who had opposed the decision to go to war in Iraq, I said that America didn't just have to end that war. We had to end the mindset that got us there in the first place.
It was a mindset characterized by a preference for military action over diplomacy, a mindset that put a premium on unilateral U.S. action over the painstaking work of building international consensus, a mindset that exaggerated threats beyond what the intelligence supported.
Leaders did not level with the American people about the costs of war, insisting that we could easily impose our will on a part of the world with a profoundly different culture and history.
And, of course, those calling for war labeled themselves strong and decisive while dismissing those who disagreed as weak, even appeasers of a malevolent adversary.
More than a decade later, we still live with the consequences of the decision to invade Iraq. Our troops achieved every mission they were given, but thousands of lives were lost, tens of thousands wounded. That doesn't count the lives lost among Iraqis. Nearly a trillion dollars was spent.
Today, Iraq remains gripped by sectarian conflict, and the emergence of al-Qaida in Iraq has now evolved into ISIL. And ironically, the single greatest beneficiary in the region of that war was the Islamic Republic of Iran, which saw its strategic position strengthened by the removal of its long-standing enemy, Saddam Hussein.
I raise this recent history because now more than ever, we need clear thinking in our foreign policy, and I raise this history because it bears directly on how we respond to the Iranian nuclear program. That program has been around for decades, dating back to the Shah's efforts, with U.S. support, in the 1960s and '70s to develop nuclear power. The theocracy that overthrew the Shah accelerated the program after the Iran-Iraq war in the 1980s, a war in which Saddam Hussein used chemical weapons to brutal effect, and Iran's nuclear program advanced steadily through the 1990s despite unilateral U.S. sanctions.
When the Bush administration took office, Iran had no centrifuges, the machines necessary to produce material for a bomb, that were spinning to enrich uranium. But despite repeated warnings from the United States government, by the time I took office, Iran had installed several thousand centrifuges and showed no inclination to slow, much less halt, its program.
Among U.S. policymakers, there's never been disagreement on the danger posed by an Iranian nuclear bomb. Democrats and Republicans alike have recognized that it would spark an arms race in the world's most unstable region and turn every crisis into a potential nuclear showdown. It would embolden terrorist groups like Hezbollah and pose an unacceptable risk to Israel, which Iranian leaders have repeatedly threatened to destroy. More broadly, it could unravel the global commitment to nonproliferation that the world has done so much to defend.
The question then is not whether to prevent Iran from obtaining a nuclear weapon, but how. Even before taking office, I made clear that Iran would not be allowed to acquire a nuclear weapon on my watch, and it's been my policy throughout my presidency to keep all options, including possible military options, on the table to achieve that objective.
But I have also made clear my preference for a peaceful diplomatic resolution of the issue, not just because of the costs of war, but also because a negotiated agreement offered a more effective, verifiable and durable resolution. And so in 2009, we let the Iranians know that a diplomatic path was available. Iran failed to take that path, and our intelligence community exposed the existence of a covert nuclear facility at Fordo.

Now some have argued that Iran's intransigence showed the futility of negotiations. In fact, it was our very willingness to negotiate that helped America rally the world to our cause and secured international participation in an unprecedented framework of commercial and financial sanctions.
Keep in mind, unilateral U.S. sanctions against Iran had been in place for decades, but had failed to pressure Iran to the negotiating table. What made our new approach more effective was our ability to draw upon new U.N. Security Council resolutions, combining strong enforcement with voluntary agreements for nations like China and India, Japan and South Korea, to reduce their purchases of Iranian oil, as well as the imposition by our European allies of a total oil embargo.
Winning this global buy-in was not easy. I know; I was there. In some cases, our partners lost billions of dollars in trade because of their decision to cooperate. But we were able to convince them that, absent a diplomatic resolution, the result could be war with major disruptions to the global economy, and even greater instability in the Middle East.
In other words, it was diplomacy, hard, painstaking diplomacy, not saber rattling, not tough talk, that ratcheted up the pressure on Iran. With the world now unified beside us, Iran's economy contracted severely, and remains about 20 percent smaller today than it would have otherwise been. No doubt this hardship played a role in Iran's 2013 elections, when the Iranian people elected a new government, that promised to improve the economy through engagement to the world.
A window had cracked open. Iran came back to the nuclear talks. And after a series of negotiations, Iran agreed with the international community to an interim deal, a deal that rolled back Iran's stockpile of near 20 percent enriched uranium, and froze the progress of its program so that the P5+1 -- the United States, China, Russia, the United Kingdom, Germany, France, and the European Union, could negotiate a comprehensive deal without the fear that Iran might be stalling for time.
Now, let me pause here just to remind everybody that, when the interim deal was announced, critics, the same critics we are hearing from now, called it a historic mistake. They insisted Iran would ignore its obligations, they warned that the sanctions would unravel. They warned that Iran would receive a windfall to support terrorism.
The critics were wrong. The progress of Iran's nuclear program was halted for the first time in a decade, its stockpile of dangerous materials was reduced, the deployment of its advanced centrifuges was stopped, inspections did increase. There was no flood of money into Iran. And the architecture of the international sanctions remained in place. In fact, the interim deal worked so well that the same people who criticized it so fiercely now cite it as an excuse not to support the broader accord. Think about that. What was once proclaimed as an historic mistake is now held up as a success and a reason to not sign the comprehensive of deal.
So keep that in mind when you assess the credibility of the arguments being made against diplomacy today. Despite the criticism, we moved ahead to negotiate a more lasting, comprehensive deal. Our diplomats, led by Secretary of State John Kerry kept our coalition united, our nuclear experts, including one of the best in the world, Secretary of Energy Ernie Moniz, work tirelessly on a technical details.
In July, we reached a comprehensive of plan of action that meets our objectives. Under its terms, Iran is never allowed to build a nuclear weapon. And while Iran, like any party to the nuclear non- proliferation treaty, is allowed to access peaceful nuclear energy, the agreement strictly defines the manner in which its nuclear program can proceed, ensuring that all pathways to a bomb are cut off.
Here is how.
Under this deal, Iran cannot acquire the plutonium needed for a bomb. The core of its heavy reactor at Arak will be pulled out, filled with concrete, replaced with one that will not produce plutonium for a weapon. The spent fuel from that reactor will be shipped out of the country, and Iran will not build any new heavy water reactors for at least 15 years.
Iran will also not be able to acquire the enriched uranium that could be used for a bomb. As soon as this deal is implemented, Iran will remove two-thirds of its centrifuges. For the next decade, Iran will not enrich uranium with its more advanced centrifuges. Iran will not enrich uranium at the previously undisclosed Fordo facility, which is very deep underground, for at least 15 years.
Iran will get rid of 98 percent of its stockpile of enriched uranium, which is currently enough for up to 10 nuclear bombs for the next 15 years. Even after those 15 years have passed, Iran will never have the right to use a peaceful program as cover to pursue a weapon, and in fact this deal shuts off the type of covert path Iran pursued in the past.
There will be 24/7 monitoring of Iran's key nuclear facilities. For decades, inspectors will have access to Iran's entire nuclear supply chain, from the uranium mines and mills where they get raw materials to the centrifuge production facilities where they make machines to enrich it. And understand why this is so important.
For Iran to cheat, it has to build a lot more than just one building or covert facility like Fordo. It would need a secret source for every single aspect of its program. No nation in history has been able to pull of such subterfuge when subjected to such rigorous inspections. And under the terms of the deal, inspectors will have the permanent ability to inspect any suspicious sites in Iran.
And finally, Iran has powerful incentives to keep its commitments. Before getting sanctions relief, Iran has to take significant concrete steps, like removing centrifuges and getting rid of its stock piles. If Iran violates the agreement over the next decade, all of the sanctions can snap back into place. We won't need the support of other members of the U.N. Security Council, America can trigger snap back on our own.
On the other hand, if Iran abides by the deal, and its economy beings to reintegrate with the world, the incentive to avoid snap back will only grow.
So this deal is not just the best choice among alternatives, this is the strongest nonproliferation agreement ever negotiated, and because this is such a strong deal, every nation in the world that has commented publicly, with the exception of the Israeli government, has expressed support. The United Nations Security Council has unanimously supported it. The majority of arms control and nonproliferation experts support it. Over 100 former ambassadors who served under Republican and Democratic presidents support it.
I've had to make a lot of tough calls as president, but whether or not this deal is good for American security is not one of those calls, it's not even close. Unfortunately, we're living through a time in American politics where every foreign policy decision is viewed through a partisan prison, evaluated by headline-grabbing soundbites, and so before the ink was even dry on this deal, before Congress even read it, a majority of Republicans declared their virulent opposition. Lobbyists and pundits were suddenly transformed into armchair nuclear scientists disputing the assessments of experts like Secretary Moniz, challenging his findings, offering multiple and sometimes contradictory arguments about why Congress should reject this deal.
But if you repeat these arguments long enough, they can get some traction. So, let me address just a few of the arguments that have been made so far in opposition to this deal.
First, there're those who say the inspections are not strong enough, because inspectors can't go anywhere in Iran at any time with no notice.
Well, here's the truth. Inspectors will be allowed daily access to Iran's key nuclear sites.
If there is a reason for inspecting a suspicious undeclared site anywhere in Iran, inspectors will get that access even if Iran objects. This access can be with as little as 24 hours notice.
And while the process for resolving a dispute about access can take up to 24 days, once we've identified a site that raises suspicion, we will be watching it continuously until inspectors get in.
And -- and by the way, nuclear material isn't something you hide in the closet.
It can leave a trace for years.
The bottom line is, if Iran cheats, we can catch them, and we will.
Second, there are those who argue that the deal isn't strong enough, because some of the limitations on Iran's civilian nuclear program expire in 15 years.
Let me repeat. The prohibition on Iran having a nuclear weapon is permanent. The ban on weapons-related research is permanent. Inspections are permanent.
It is true that some of the limitations regarding Iran's peaceful program last only 15 years. But that's how arms control agreements work. The first SALT treaty with the Soviet Union lasted five years. The first START treaty lasted 15 years.
And in our current situation, if 15 or 20 years from now, Iran tries to build a bomb, this deal ensures that the United States will have better tools to detect it, a stronger basis under international law to respond and the same options available to stop our weapons program as we have today, including, if necessary, military options.
On the other hand, without this deal, the scenarios that critics warn about happening in 15 years could happen six months from now. By killing this deal, Congress would not merely Iran's pathway to a bomb, it would accelerate it.
Third, a number of critics say the deal isn't worth it, because Iran will get billions of dollars in sanctions relief.
Now, let's be clear. The international sanctions were put in place precisely to get Iran to agree to constraints on its program. That's the point of sanctions. Any negotiated agreement with Iran would involve sanctions relief.
So an argument against sanctions relief is effectively an argument against any diplomatic resolution of this issue. It is true that if Iran lives up to its commitments, it will gain access to roughly $56 billion of its own money, revenue frozen overseas by other countries.
But the notion that this will be a game-changer with all this money funneled into Iran's pernicious activities misses the reality of Iran's current situation.
Partly because of our sanctions, the Iranian government has over half a trillion dollars in urgent requirements, from funding pensions and salaries to paying for crumbling infrastructure.
Iran's leaders have raised expectations of their people, that sanctions relief will improve their lives. Even a repressive regime like Iran's cannot completely ignore those expectations, and that's why our best analysts expect the bulk of this revenue to go into spending that improves the economy and benefits the lives of the Iranian people.
Now, this is not to say that sanctions relief will provide no benefit to Iran's military. Let's stipulate that some of that money will flow to activities that we object to.
We have no illusions about the Iranian government or the significance of the Revolutionary Guard and the Quds Force. Iran supports terrorist organizations like Hezbollah. It supports proxy groups that threaten our interests and the interests of our allies, including proxy groups who killed our troops in Iraq.
They tried to destabilize our Gulf partners. But Iran has been engaged in these activities for decades. They engaged in them before sanctions and while sanctions were in place. In fact, Iran even engaged in these sanctions in the middle of the Iran-Iraq war, a war that cost them nearly a million lives and hundreds of billions of dollars. The truth is that Iran has always found a way to fund these efforts, and whatever benefit Iran may claim from sanctions relief pales in comparison to the danger it could pose with a nuclear weapon.
Moreover, there is no scenario where sanctions relief turns Iran into the region's dominant power. Iran's defense budget is eight times smaller than the combined budget of our Gulf allies. Their conventional capabilities will never compare to Israel's, and our commitment to Israel's qualitative military edge helps guarantee that.
Over the last several years, Iran has had to spend billions of dollars to support its only ally in the Arab world, Bashar al-Assad, even as he's lost control of huge chunks of his country. And Hezbollah suffered significant blows on this same battlefield. And Iran, like the rest of the region, is being forced to respond to the threat of ISIL in Iraq.
So, contrary to the alarmists who claim Iran is on the brink of taking over the Middle East, or even the world, Iran will remain a regional power with its own set of challenges. The ruling regime is dangerous and it is repressive. We will continue to have sanctions in place on Iran's support for terrorism and violation of human rights. We will continue to insist upon the release of Americans detained unjustly. We will have a lot of differences with the Iranian regime.
But if we are serious about confronting Iran's destabilizing activities, it is hard to imagine a worse approach than blocking this deal. Instead, we need to check the behavior that we are concerned about directly, by helping our allies in the region strengthen their own capabilities to counter a cyber attack or a ballistic missile, by improving the interdiction of weapons' shipments that go to groups like Hezbollah, by training our allies' special forces so they can more effectively respond to situations like Yemen.
All these capabilities will make a difference. We will be in a stronger position to implement them with this deal.
And by the way, such a strategy also helps us effectively confront the immediate and lethal threat posed by ISIL.
Now, the final criticism, this is sort of catchall that you may hear, is the notion that there is a better deal to be had. We should get a better deal. That is repeated over and over again. It's a bad deal -- we need a better deal.

One that relies on vague promises of toughness and, more recently, the argument that we can apply a broader and indefinite set of sanctions to squeeze the Iranian regime harder. Those making this argument are either ignorant of Iranian society, or they are not being straight with the American people. Sanctions alone are not going to force Iran to completely dismantle all vestiges of its nuclear infrastructure, even aspects that are consistent with peaceful programs. That, is oftentimes, is what the critics are calling a better deal.
Neither the Iranian government, or the Iranian opposition, or the Iranian people would agree to what they would view as a total surrender of their sovereignty.
Moreover, our closest allies in Europe or in Asia, much less China or Russia, certainly are not going to enforce existing sanctions for another five, 10, 15 years according to the dictates of the U.S. Congress because their willingness to support sanctions in the first place was based on Iran ending its pursuit of nuclear weapons. It was not based on the belief that Iran cannot have peaceful nuclear power, and it certainly wasn't based on a desire for regime change in Iran.
As a result, those who say we can just walk away from this deal and maintain sanctions are selling a fantasy. Instead of strengthening our position, as some have suggested, Congress' rejection would almost certainly result in multi-lateral sanctions unraveling.
If, as has also been suggested, we tried to maintain unilateral sanctions, beefen them up, we would be standing alone. We cannot dictate the foreign, economic and energy policies of every major power in the world. In order to even try to do that, we would have to sanction, for example, some of the world's largest banks. We'd have to cut off countries like China from the American financial system. And since they happen to be major purchasers of our debt, such actions could trigger severe disruptions in our own economy, and, by way, raise questions internationally about the dollar's role as the world's reserve currency. That's part of the reason why many of the previous unilateral sanctions were waived.
What's more likely to happen should Congress reject this deal is that Iran would end up with some form of sanctions relief without having to accept any of the constraints or inspections required by this deal. So in that sense, the critics are right. Walk away from this agreement, and you will get a better deal -- for Iran.
Now because more sanctions won't produce the results that the critics want, we have to be honest. Congressional rejection of this deal leaves any U.S. administration that is absolutely committed to preventing Iran from getting a nuclear weapon with one option, another war in the Middle East. I say this not to be provocative, I am stating a fact. Without this deal, Iran will be in a position, however tough our rhetoric may be, to steadily advance its capabilities. Its breakout time, which is already fairly small, could shrink to near zero. Does anyone really doubt that the same voices now raised against this deal will be demanding that whoever is president bomb those nuclear facilities? And as someone who does firmly believe that Iran must not get a nuclear weapon and who has wrestled with this issue since the beginning of my presidency, I can tell you that alternatives to military actions will have been exhausted once we reject a hard-won diplomatic solution that the world almost unanimously supports.
So let's not mince words. The choice we face is ultimately between diplomacy or some form of war. Maybe not tomorrow, maybe not three months from now, but soon.
OBAMA: And here's the irony. As I said before, military action would be far less effective than this deal in preventing Iran from obtaining a nuclear weapon. That's not just my supposition. Every estimate, including those from Israeli analysts, suggest military action would only set back Iran's program by a few years at best, which is a fraction of the limitations imposed by this deal.
It would likely guarantee that inspectors are kicked out of Iran. It is probable that it would drive Iran's program deeper underground. It would certainly destroy the international unity that we have spent so many years building.
Now, there are some of opponents -- I have to give them credit. They're opponents of this deal who accept the choice of war. In fact, they argue that surgical strikes against Iran's facilities will be quick and painless.
But if we've learned anything from the last decade, it's that wars in general and wars in the Middle East in particular are anything but simple.
The only certainty in war is human suffering, uncertain costs, unintended consequences.
We can also be sure that the Americans who bear the heaviest burden are the less-than-1 percent of us, the outstanding men and women who serve in uniform, and not those of us who send them to war.
As commander-in-chief, I have not shied away from using force when necessary. I have ordered tens of thousands of young Americans into combat. I have sat by their bedside sometimes when they come home.
I've ordered military action in seven countries. There are times when force is necessary, and if Iran does not abide by this deal, it's possible that we don't have an alternative.
But how can we, in good conscience, justify war before we've tested a diplomatic agreement that achieves our objectives, that has been agreed to by Iran, that is supported by the rest of the world and that preserves our option if the deal falls short? How could we justify that to our troops? How could we justify that to the world or to future generations? In the end, that should be a lesson that we've learned from over a decade of war. On the front end, ask tough questions, subject our own assumptions to evidence and analysis, resist the conventional wisdom and the drumbeat of war, worry less about being labeled weak, worry more about getting it right.
I recognize that resorting to force may be tempting in the face of the rhetoric and behavior that emanates from parts of Iran. It is offensive. It is incendiary. We do take it seriously.
But superpowers should not act impulsively in response to taunts or even provocations that can be addressed short of war. Just because Iranian hardliners chant "Death to America" does not mean that that's what all Iranians believe. In fact, it's those...
In fact, it's those hardliners who are most comfortable with the status quo. It's those hardliners chanting "Death to America" who have been most opposed to the deal. They're making common cause with the Republican Caucus.
The majority of the Iranian people have powerful incentives to urge their government to move in a different, less provocative direction, incentives that are strengthened by this deal. We should offer them that chance. We should give them the opportunity.

It's not guaranteed to succeed. But if they take it, that would be good for Iran. It would be good for the United States. It would be good for a region that has known too much conflict. It would be good for the world.
And if Iran does not move in that direction, if Iran violates this deal, we will have ample ability to respond. You know, the agreements pursued by Kennedy and Reagan with the Soviet Union. Those agreements and treaties involved America accepting significant constraints on our arsenal. As such, they were riskier.
This agreement involves no such constraints. The defense budget of the United States is more than $600 billion. To repeat, Iran's is about $15 billion. Our military remains the ultimate backstop to any security agreement that we make. I have stated that Iran will never be allowed to obtain a nuclear weapon, and have done what is necessary to make sure our military options are real. And I have no doubt that any president who follows me will take the same position.
So, let me sum up here. When we carefully examine the arguments against this deal, none stand up to scrutiny. That may be why the rhetoric on the other side is so strident. I suppose some of it can be ascribed to knee-jerk partisanship that has become all too familiar, rhetoric that renders every decision made to be a disaster, a surrender. You're aiding terrorists; you're endangering freedom.
On the other hand, I do think it is important to a knowledge another more understandable motivation behind the opposition to this deal, or at least skepticism to this deal. And that is a sincere affinity for our friend and ally Israel. An affinity that, as someone who has been a stalwart friend to Israel throughout my career, I deeply share.

When the Israeli government is opposed to something, people in the United States take notice; and they should. No one can blame Israelis for having a deep skepticism about any dealings with the government like Iran's, which includes leaders who deny the Holocaust, embrace an ideology of anti-Semitism, facilitate the flow of rockets that are arrayed on Israel's borders. Are pointed at Tel Aviv.
In such a dangerous neighbor Israel has to be vigilant, and it rightly insists it cannot depend on any other country, even it's great friend the United States, for its own security.
So, we have to take seriously concerns in Israel. But the fact is, partly due to American military and intelligence assistance, which my administration has provided at unprecedented levels, Israel can defend itself against any conventional danger, whether from Iran directly or from its proxies. On the other hand, a nuclear-armed Iran changes that equation.
And that's why this deal must be judged by what it achieves on the central goal of preventing Iran from obtaining a nuclear weapon. This deal does exactly that. I say this as someone who is done more than any other president to strengthen Israel's security. And I have made clear to the Israeli government that we are prepared to discuss how we can deepen that cooperation even further. Already, we have held talks with Israel on concluding another 10-year plan for U.S. security assistance to Israel.

We can enhance support for areas like missile defense, information sharing, interdiction, all to help meet Israel's pressing security needs. And to provide a hedge against any additional activities that Iran may engage in as a consequence of sanctions relief.

But I have also listened to the Israeli security establishment, which warned of the danger posed by a nuclear armed Iran for decades. In fact, they helped develop many of the ideas that ultimately led to this deal. So to friends of Israel and the Israeli people, I say this. A nuclear armed Iran is far more dangerous to Israel, to America, and to the world than an Iran that benefits from sanctions relief.
I recognize that prime minister Netanyahu disagrees, disagrees strongly. I do not doubt his sincerity, but I believe he is wrong. I believe the facts support this deal. I believe they are in America's interests and Israel's interests, and as president of the United States it would be an abrogation of my constitutional duty to act against my best judgment simply because it causes temporary friction with a dear friend and ally.
I do not believe that would be the right thing to do for the United States, I do not believe it would be the right thing to do for Israel.

For the last couple of weeks, I have repeatedly challenged anyone opposed to this deal to put forward a better, plausible alternative. I have yet to hear one. What I've heard instead are the same types of arguments that we heard in the run up to the Iraq war. "Iran cannot be dealt with diplomatically." "We can take military strikes without significant consequences." "We shouldn't worry about what the rest of the world thinks, because once we act, everyone will fall in line." "Tougher talk, more military threats will force Iran into submission." "We can get a better deal."
I know it's easy to play in people's fears, to magnify threats, to compare any attempt at diplomacy to Munich, but none of these arguments hold up. They didn't back in 2002, in 2003, they shouldn't now.
That same mind set in many cases offered by the same people, who seem to have no compunction with being repeatedly wrong lead to a war that did more to strengthen Iran, more to isolate the United States than anything we have done in the decades before or since. It's a mind set out of step with the traditions of American foreign policy where we exhaust diplomacy before war and debate matters of war and peace in the cold light of truth.
"Peace is not the absence of conflict," President Reagan once said. It is the ability to cope with conflict by peaceful means. President Kennedy warned Americans not to see conflict as inevitable, accommodation as impossible, and communication as nothing more than the exchange of threats. It is time to apply such wisdom. The deal before us doesn't bet on Iran changing, it doesn't require trust, it verifies and requires Iran to forsake a nuclear weapon.
Just as we struck agreements with the Soviet Union at a time when they were threatening our allies, arming proxies against us, proclaiming their commitment to destroy our way of life, and had nuclear weapons pointed at all of our major cities, a genuine existential threat.
You know, we live in a complicated world, a world in which the forces unleashed by human innovation are creating for our children that were unimaginable for most of human history.
It is also a world of persistent threats, a world in which mass violence and cruelty is all too common and human innovation risks the destruction of all that we hold dear.
In this world, the United States of America remains the most powerful nation on Earth, and I believe that we will remain such for decades to come.
But we are one nation among many, and what separates us from the empires of old, what has made us exceptional, is not the mere fact of our military might.
Since World War II, the deadliest war in human history, we have used our power to try and bind nations together in a system of international law. We have led an evolution of those human institutions President Kennedy spoke about to prevent the spread of deadly weapons, to uphold peace and security and promote human progress.
We now have the opportunity to build on that progress. We built a coalition and held together through sanctions and negotiations, and now we have before us a solution that prevents Iran from obtaining a nuclear weapon without resorting to war.
As Americans, we should be proud of this achievement. And as members of Congress reflect on their pending decision, I urge them to set aside political concerns, shut out the noise, consider the stakes involved with the vote that you will cast.
If Congress kills this deal, we will lose more than just constraints on Iran's nuclear deal or the sanctions we have painstakingly built. We will have lost something more precious: America's credibility as a leader of diplomacy. America's credibility is the anchor of the international system.
John F. Kennedy cautioned here more than 50 years ago at this university that the pursuit of peace is not as dramatic as the pursuit of war. But it's so very important. It is surely the pursuit of peace that is most needed in this world so full of strife.
My fellow Americans, contact your representatives in Congress, remind them of who we are, remind them of what is best in us and what we stand for so that we can leave behind a world that is more secure and more peaceful for our children.
Thank you very much.


Report: UN Watchdog Can Monitor Deal Effectively

The International Atomic Energy Agency (IAEA) will be “up to the task” of monitoring the final nuclear deal between Iran and the world’s six major powers, according to Thomas Shea, who worked in the IAEA Department of Safeguards for 24 years.  A report commissioned by Search for Common Ground and the Princeton University Program on Science and Global Security assessed the ability of the IAEA to effectively monitor and verify the agreement. The following is an excerpt of the report.

Verification by the IAEA
The International Atomic Energy Agency (IAEA) will be responsible for verifying the new agreement with technical and intelligence support from its member countries. The IAEA will have access to Iran’s declared nuclear activities under the comprehensive safeguards agreement that all 186 non-nuclear weapon states parties to the NPT are required to conclude. Iran also has agreed to comply with the Additional Protocol, under which it will have to provide the IAEA with information on all of its nuclear-related activities and allow the IAEA access to check that those declarations are complete and correct. Finally, under the JCPOA, Iran has agreed to provide the IAEA with routine access to verify key nuclear activities that do not involve nuclear materials, including Iran’s production and storage of centrifuges.
In addition, to these on-site verification activities, the IAEA receives relevant intelligence from its member states, including the United States, is open to receiving information from non-governmental organizations and will acquire and analyze satellite images of sites of potential concern in Iran.
If the IAEA becomes concerned about any activities in Iran, its inspectors will first seek clarification. If they are not satisfied by the response, they will refer the issue to higher level IAEA officials and ultimately to the Director General who can request a response from the highest government levels in Iran. Finally, if the Director General is not satisfied, he can refer the matter to the IAEA’s Board of Governors (BOG) and the BOG can refer it to UN Security Council as the IAEA did in 2006 when Iran decided to end its suspension of its enrichment program.
The IAEA will organize its verification strategy by considering the steps that Iran would likely take if it were to decide to pursue nuclear weapons.
The IAEA’s verification activities will:
1. Search for any clandestine installations or undeclared nuclear material that could support nuclear weapon related activities, including undeclared plants for producing fissile material and weaponization facilities.
2. Check that declared peaceful nuclear facilities are used solely for peaceful activities and that all operations in those facilities are declared to the IAEA.
3. Assure that nuclear materials subject to IAEA safeguards are not diverted for the manufacture of nuclear weapons, other nuclear explosives, or for any purpose unknown.
4. Verify that Iran does not import equipment or material except as provided in the agreement.
5. Verify that Iran is complying with the limitations on its nuclear program that it committed to under the terms of the JCPOA.
Detection of Clandestine Facilities
The most critical and challenging task for the IAEA will be the detection of clandestine facilities. Intelligence sharing by member states will amplify the Agency’s limited inhouse capabilities. States share information with the IAEA because the agency can pursue evidence of clandestine activities on the ground, using its legal authorities.
The Additional Protocol provides a means for the IAEA to request “complementary access” when it has questions it needs to resolve about non-declared sites. The JCPOA dictates that the maximum time for Iran to agree to an IAEA request for access or satisfy the Agency’s concerns in some other way will not exceed 24 days. Even before contacting Iran, the IAEA would start by ordering satellite imagery, perhaps continuing throughout the investigation, and by seeking corroborating information, especially from states willing to share intelligence.
Possible Military Dimensions
The JCPOA also requires the Director General of the IAEA to make a conclusory report on the “possible military dimensions” of Iran’s past nuclear activities by the end of 2015. This step will enable the next phase of implementation to begin, in which most of the sanctions imposed on Iran will be lifted. The Director General will likely conclude that the IAEA has gained a full understanding of Iran’s past activities and supports full implementation of the JCPOA.
The IAEA has been preparing for its Iran verification role since it first opened for business in 1957, and it will be up to the task.
The IAEA’s capabilities have been extended, strengthened and refined over the years in response to real-world proliferation cases in Iraq and North Korea. Its current capacity reflects the international community’s decades-long investment in the organization, and the continuing commitment of states around the world to its mission. Unlike the preIraqi nuclear watchdog, the IAEA is now more like a focused information hub, wired to a host of information generating nodes that regularly update what the IAEA knows.
The IAEA will be scrupulously precise, scientific, tactful and demanding in reaching its conclusions, as it is in all states. It will examine all information made available to it, promptly and fairly, and insist on the immediate resolution of any discrepancies or anomalies. Ever mindful of its immense responsibilities, the IAEA will inform the global community should it be convinced that Iran’s compliance with its obligations is in doubt, or if Iran hinders verification activities by failing to cooperate and assist the IAEA.
Assuming that the IAEA continues to receive the political, technical, financial and operational support from the international community necessary for its success, and that regional strife does not impede its ability to put its inspectors on the ground, the Agency can and will be able to accomplish the tasks it has been assigned under the JCPOA. It will be able to verify the agreed operational limits on Iran’s nuclear programs, and, if the need arises, the IAEA will sound the alarm in time for decisive action to be taken.
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